As senior manager at global consultancy Zanders, Mark Sutton is on the front line of treasury management and corporate finance in the UK and EU. He’s had that perspective for more than a decade, notching a previous 10-year stint at Citi’s EMEA and then Singapore offices. He has seen treasury and other senior finance functions undergo intense change during that time, most of it driven by digital transformation and advances in data analytics.
Both developments have been thrown into overdrive by the pandemic and the need for banks and non-financial service companies to automate their processes and take advantage of the data that results from digital operations. Even with those developments, he is acutely aware of the human touch necessary to compete in the current environment. Zanders, and Mark, are valued partners of Bottomline’s global banking effort, and I was happy to sit down with him to get his take on the issues driving treasury management and other topics.
Bottomline: Mark, we read a lot of what you write and hear your comments in various industry forums. And you’re certainly on the cutting edge, but before we get to the issues driving this business, let’s level set. You can’t read about or discuss treasury management these days without seeing the words “evolving” or “transforming” or “connected.” When you think back to pre-pandemic days, has the office of the treasurer or CFO really changed that much? And if it has, what are the most impactful changes?
Sutton: Well, I do think it has changed. The corporate landscape is being redefined by a plethora of factors, from new business models and changing regulations to increased competition from digital natives. Now add a pandemic, market volatility and supply chain challenges and you have an accelerated digital agenda for treasurers and CFOs. At the top of it is the digital real-time experience which is creating the need for change in order to stay relevant and ideally thrive. It’s also important to recognize that a digital transformation is not a destination – it’s a journey that extends beyond the pure adoption of technology. While technology is the enabler, in order to achieve the full benefits of this digital transformation journey, a more holistic view is required that embraces people and processes.
Bottomline: A key passion point for you is data, and you see some big changes there. What are they?
Sutton: You know, people have been talking about data as the new black gold for many years. But it's not only data. It’s structured data. I think people sometimes lose sight of that. I can do much more with structured data than just unstructured data, which I have to interpret to use effectively. With structured data, the data points allow me to create a much better picture of my cash position. One of the sources for structured data comes from accounts payable. Smart companies will automate AP and AR, and they're starting to look at how they can integrate that data into prescriptive, predictive analytics to allow more informed decisions to be made.
Bottomline: Interesting that you specify the new kinds of data and data sources that need to be cultivated. Will this require strategic changes?
Sutton: Actually, it will require a two-fold strategy. First, operational treasury reports need to be run directly in the treasury management system (TMS). Secondly, more analytical and interactive dashboarding needs to be built in a separate BI tool, which runs off a wider data lake, or directly off the TMS database if the data lake is not there.
Bottomline: How does that move toward the advanced analytics capabilities that you talked about earlier?
Sutton: With increasing advances in both artificial intelligence (AI) and Machine Learning (ML), the ambition should be to move more towards interactive dashboards with drill-down functionality rather than the traditional static reports with lots of data on them. The move to predictive and prescriptive analytics will redefine best-in-class models, but it’s important to remember that data is the fuel that powers AI. So, it’s important to get the correct data architecture in place to enable this next step. We see improvements in the use of data as a key driver to unlock value in treasuries in the coming years as it will both accelerate and provide more informed decision-making within the enterprise.
Bottomline: Now we know that API technology can open the doors to new data sources. But how does this come together for a real-time treasury view?
Sutton: They connect. The journey to real-time treasury will be underpinned by a combination of the new ‘faster payment’ rails being established in many countries in the world to support real-time payments and the increasing use of API technology. APIs will become a foundational technology within the digital transformation, and the underlying benefits will come through the acceleration and greater automation of current processes. Specific benefits to treasury include, for example, real-time credit notifications which allow the acceleration of the cash application process and thereby reduce DSO (days sales outstanding) which is a key treasury working capital metric.
Bottomline: Why hasn’t this all happened already?
Sutton: API technology within treasury continues to lack aligned industry standards around API financial messages. This represents one of the greatest challenges to mainstream adoption as corporate clients are not particularly keen to develop a series of proprietary API standards. Anything proprietary to a bank goes against the increasingly important corporate focus of standardization and simplification.
Bottomline: Last question, Mark. I want to ask you to respond to a recent comment from Eleanor Hill, editor of Treasury Management International. “Inevitably, the health crisis also led to an intense focus on cash flow, with companies looking to build cash buffers to withstand shocks, while also shoring up supply chains. Arguably the most significant challenge, however, was not so much the pandemic itself, but the perfect storm surrounding it. At the same time as Covid-19, treasurers were coping with low and even negative interest rates, together with regulatory changes, Brexit, technology developments, and an ever-increasing focus on the ESG agenda.”
Sutton: Corporate treasury has had a challenging time over the past few years, however, what we have seen is that corporate treasury has stepped up, protecting liquidity and cash flow in addition to managing risk. We also see a trend toward leveraging more advanced liquidity management techniques, like in-house banking and creating data structures that optimize financial efficiencies. We also see changes in the core skill sets required within corporate treasury as strategic thinking is now being highlighted as a critical skill in addition to analytical and digital capabilities.
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With more than 22 years of experience in the Financial Services sector, and specialising in payments over the last 10 years, Zhenya Winter is currently Head of Financial Messaging Marketing - Global at Bottomline. Key areas of focus within payments include Real-Time domestic & cross-border payments & ISO 20022.